EXTENSION  OF  NATIONAL  BANK  CKARTEBS, 


SPEECH 


HON.  I).  C.  SMITH, 


OF  ILLINOIS, 


IN  THE 


HOUSE  OF  REPRESENTATIVES, 


MAY  13,  1883. 


WASHINGTON  . 
1882. 


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SPEECH 

OF 

HON.  D.  C.  SMITH. 

3 


Tlie  House  having  under  consideration  the  bill  (H.  R.  4167)  to  enable  national 
banking  associations  to  extend  their  corporate  existence — 

Mr.  SMITA,  of  Illinois,  said: 

Mr.  Speaker:  I occupy  a somewhat  peculiar  position  in  regard  to 
tlie  matter  now  under  consideration.  As  a private  banker,  coming  in 
competition  daily  in  my  business  with  tbe  national  bank  of  our  city, 
it  will  seem  somewhat  remarkable  to  members  of  this  House  that  I 
should  be  an  advocate  of  the  continuance  of  the  national  banking 
system,  and  yet  that  is  the  case.  Having  been  in  the  banking  business 
for  quite  a number  of  years,  having  observed  the  operation  of  the 
national  banking  system,  I am  firmly  convinced  that  the  best  inter- 
ests of  the  people  of  this  country  will  be  subserved  by  the  continua- 
tion of  that  system.  Being  convinced  that  the  interests  of  the  people 
will  thereby  best  be  subserved,  I am  in  favor  of  a bill  which  will 
facilitate  the  reorganization,  or  rather  the  extension,  of  the  national- 
bank  charters  when  they  expire. 

The  first  reason  for  this  that  occurs  to  me  is  that  it  will  keep  in 
the  channels  of  trade  a great  deal  of  money  now  in  the  banks  to  be 
reorganized,  which  if  they  go  into  liquidation  will  seek  investment 
elsewhere.  The  amount  of  that  money  which  composes  the  surplus 
funds  of  the  banks  is  $184,000,000,  according  to  the  report  of  the 
Comptroller  of  the  Currency.  If  you  compel  the  present  corpora- 
tions to  liquidate  their  liabilities  to  stockholders  and  depositors,  all 
this  surplus  will  be  scattered  and  go  into  other  enterprises — and 
that  is  a large  sum.  Whereas  if  these  charters  are  renewed,  as  is 
proposed  by  this  bill,  the  bulk  of  that  money  may  be  retained  by 
these  banks  for  the  uses  to  which  it  is  now  applied.  This  to  my  mind 
is  one  strong  argument  why  the  facility  proposed  to  be  extended  by 
this  bill  to  these  banks  should  be  granted  under  their  organizations 
as  they  now  exist. 

There  have  been  objections  urged  upon  this  floor  against  this  bill 
Decause  parties  making  them  were  in  favor  of  the  distribution  of 
this  surplus  fund  to  the  stockholders.  This  bill  provides  that  in  case 
there  is  a dispute,  the  stockholder  who  wishes  to  retire  from  the  na- 
tional banking  system,  and  withdraw  his  interest,  shall  be  justly 
' treated.  That  his  stock  and  its  value — its  market  value — shall  be 
appraised  by  three  persons,  one  to  be  appointed  by  himself,  one  by  the 
bank,  and  those  two  to  choose  a third,  who  shall  say  what  is  the 
value  of  his  stock,  and  that  value  the  bank  must  pay  ; and  if  the 
bank  refuses  to  pay  its  value,  it  further  provides  that  he  shall  have 
an  appeal  to  the  Comptroller  of  the  Currency,  who  shall  appoint 
some  person  with  authority  to  make  a final  decision.  The  commit- 


r37S57 


4 


tee,  therefore,  have  aimed  to  do  justice  to  the  stockholders  of  the 
national  hanks,  and  no  one  would  be  aggrieved  by  the  passage  of 
this  bill. 

One  more  point  before  I leave  the  stockholders.  There  are  many 
individuals  representing  trust  funds  who  have  invested  that  money 
in  the  stock  of  national  banks,  and  have  regarded  it  as  the  safest 
and  best  investment  possible,  as  well  as  the  mo  st  profitable  to  the 
widows  and  orphans  of  the  estates  they  represent.  Has  it  ever  oc- 
curred to  gentlemen  in  this  House  that  much  of  the  money  now  in- 
vested in  this  manner  in  the  national-bank  stocks  (money  held  by 
these  parties  in  trust)  would  be  seeking  other  investment,  and  such 
trustees  would  nob  be  again  able,  under  the  law,  to  purchase  new 
stock  in  other  corporations  and  thereby  be  compelled  to  do  great  in- 
jury to  the  trusts  they  hold  if  we  do  not  pass  this  bill  ? To  many  hold- 
ers of  national-bank  stock  which  is  now  well  invested  and  a profit- 
able source  of  income  this  would  be  a hardship. 

Mr.  BRUMM.  Will  the  gentleman  yield  to  me  for  a question  ? 

Mr.  SMITH,  of  Illinois.  Certainly.  % 

Mr.  BRUMM.  I would  like  to  ask  the  gentleman  in  the  first  place 
must  not  the  present  system  be  abolished  or  the  public  debt  be  per- 
petuated? And  then  I would  like  to  ask  him  a question  as  to  this 
trustee  business  to  which  he  has  referred. 

Mr.  SMITH,  of  Illinois.  In  answer  to  the  gentleman’s  question  I 
will  reply,  not  at  all.  The  Comptroller  of  the  Currency  advises  us 
that  as  long  as  there  are  $150,000,000  of  Government  bonds  in  exist- 
ence the  present  national  banking  system  can  be  maintained  with 
its  present  circulation. 

Mr.  BUCKNER.  Not  with  its  present  circulation. 

Mr.  SMITH,  of  Illinois.  I should  have  said,  with  the  least  possi- 
ble circulation  under  existing  laws. 

Mr.  BRUMM.  Then  you  must  conte mplate  the  existence  of  a pub- 
lic debt  to  that  extent. 

Mr.  SMITH,  of  Illinois.  Not  at  all.  I am  in  favoring  of  maintain- 
ing the  national  banking  system  even  if  they  lose  every  dollar  of 
their  circulation. 

Mr.  BRUMM.  Now,  in  reference  to  this  issuing  business,  that 
being  the  main  object  of  the  bill 

Mr.  SMITH,  of  Illinois.  I beg  the  gentleman’s  pardon;  it  says 
nothing  about  the  issuing  business. 

Mr.  BRUMM.  Does  not  this  bill  expressly  refer  to  the  right  of  the 
national  banks  to  issue  their  money  ? It  does  not  say  deposits  on 
demand  or  exchanges;  if  so,  I would  like  the  gentleman  to  point  it 
out. 

Mr.  SMITH,  of  Illinois.  The  gentleman  must  certainly  know  that 
the  national  banking  system  does  not  derive  its  great  benefits  from 
the  fact  that  it  is  allowed  a currency.  That  is  the  least,  as  has  been 
so  ably  shown  by  the  gentleman  from  Massachusetts. 

What  is  it  that  makes  the  national  banking  system  profitable  ? 
It  is  that  it  commands  the  confidence  of  the  people  and  thereby  com- 
mands their  deposits  ; and  it  is  upon  these  deposits  that  they  make 
their  millions  and  millions  of  money,  and  not  upon  the  circulation  as 
furnished  them  by  the  national  Government. 

Mr.  BRUMM.  Will  the  gentleman  permit  me  to  ask  him  a ques- 
tion ? 

Mr.  SMITH,  of  Illinois.  Yes,  sir. 

Mr.  BRUMM.  Is  the  gentleman  willing  to  vote  for  a bill  that  will 
retain  to  the  national  banks  every  function  that  they  now  possess 
except  the  issuing  function  ? 


A\ 


5 

Mr.  SMITH,  of  Illinois.  That  question  is  not  before  us  now. 

Mr.  BRUMM.  I am  asking  you  now,  will  you  vote  for  such. a bill  ? 

Mr.  SMITH,  of  Illinois.  I think  when  the  time  comes  when  we 
4 shall  have  sufficient  specie  in  the  United  States  upon  which  to  base 
our  currency,  that  the  national-hank  hills  may  he  retired.  I am  in 
favor  of  maintaining  the  national  hanks  now  and  paying  off  the  na- 
tional debt  as  rapidly  as  possible.  If  they  are  compelled  gradually 
and  slowly  to  retire  their  circulation,  well  and  good ; this  fact  does 
not  frighten  me,  and  for  this  reason : we  are  increasing,  or  have  dur- 
ing the  last  three  or  four  years  increased,  our  circulation  to  such  a 
large  extent  by  the  importation  of  gold  and  the  prodt&tion  of  silver 
that  we  have  mined,  upon  which  we  have  issued  those  silver  certifi- 
cates, which  I think  are  the  best  circulation  we  have — a great  deal 
better  than  your  national-bank  bills  or  your  greenbacks,  because  every 
one  of  them  represents  so  much  specie  on  hand.  By  the  increase  of 
those  silver  certificates,  if  our  prosperity  continues  and  the  balance 
of  trade  should  continue  to  be  in  our  favor,  we  could  gradually  dis- 
pense with  the  circulation  of  the  national  banks ; and  this  threat  of 
the  retirement  of  the  national-bank  currency  has  no  terror  for  me. 

Mr.  BRUMM.  That  is  all  I want  to  know. 

Mr.  DINGLE Y.  Will  the  gentleman  yield  to  me  for  a question  ? 

Mr.  BURROWS,  of  Missouri.  I desire  also  to  ask  a question. 

Mr.  SMITH,  of  Illinois.  Certainly ; I am  willing  to  listen  to  any 
questions  that  may  be  put  to  me. 

Mr.  DINGLE  Y.  " I wish  to  make  a suggestion  at  this  point  whether 
it  is  not  a little  premature  to  predicate  legislation  with  respect  to 
the  currency  upon  an  extinguished  national  debt  when  it  is  fifteen 
hundred  millions  to-day  and  seven  hundred  and  thirty-nine  millions 
of  it  do  not  become  due  for  twenty-five  years. 

Mr.  BRUMM.  Does  the  gentleman  from  Maine  wish  me  to  answer 
him? 

Mr.  SMITH,  of  Illinois.  I will  answer  him.  1 think  that  discus- 
sion would  be  premature  now,  as  the  discussion  between  my  friend 
from  Maine  [Mr.  Dingle y]  and  the  gentleman  from  Missouri  [Mr. 
Bland]  on  the  silver  question  was  entirely  premature. 

Mr.  BRUMM.  Their  questions  and  answers  are  birds  of  a feather. 
The  answer  is,  with  proper  legislation  we  need  not  have  any  fifteen 
hundred  millions  of  debt  or  any  thing  like  it. 

Mr.  BURROWS,  of  Missouri.  The  question  I wish  to  ask  the  gen- 
tleman from  Illinois  is  this  : he  seems  very  much  in  favor  of  silver 
certificates,  and  so  am  I.  I would  like  him  to  account  for  the  rec- 
ommendation of  the  Secretary  of  the  Treasury  in  recommending  that 
sixty-six  millions  of  silver  certificates  be  retired. 

Mr.  SMITH,  of  Illinois.  I do  not  agree  with  the  Secretary  of  the 
Treasury  in  that  ? 

Mr.  TURNER,  of  Kentucky.  That  is  honest. 

Mr.  PAYSON.  It  is  a good  answer  and  a short  one. 

Mr.  SMITH,  of  Illinois.  Well,  to  continue  my  remarks,  according 
to  the  report  of  the  Comptroller  of  the  Treasury,  which  I hold  in  my 
hand,  the  charters  of  three  hundred  and  ninety-three  national  banks 
will  expire  before  another  Congress  could  take  action  upon  this 
matter.  Therefore  if  we  are  friendly  to  the  national  banks — of  course 
it  is  all  based  upon  that — if  this  Congress  is  friendly  to  the  national 
banks  we  should  pass  this  bill  now,  in  order  that  these  three  hundred 
and  ninety-three  banks,  whose  charters  expire  before  February  of 
next  year,  may  have  the  opportunity  of  extending  their  charters 
under  this  act  which  we  propose  to  pass.  I wish  to  touch  upon  a few 


() 


of  the  reasons  why  I think  the  national  hanking  system  should  he 
continued. 

Mr.  BUCKNER.  Will  the  gentleman  allow  me  to  ask  him  a ques- 
tion right  here? 

Mr.  SMITH,  of  Illinois.  Certainly.  * 

Mr.  BUCKNER.  Has  the  gentleman  the  means  of  stating  to  the1" 
House  what  proportion  of  the  bonds  held  by  these  three  hundred  and 
ninety -three  banks  are  in  the  3^  percents  ? 

Mr.  SMITH,  of  Illinois.  I have  it  not  at  my  command  at  this 
moment,  but  the  gentleman  from  Missouri  [Mr.  Buckner]  has  it, 
and  he  will  be  able  to  give  it  when  he  makes  his  speech.  If  these 
banks  have  not  sufficient  bonds  of  the  3^  percents  they  will  have 
to  purchase  4 percents  and  \\  percents  when  the  others  are  called. 

Mr.  BUCKNER.  Suppose  they  have  not  the  4 and  4^  percents. 

Mr.  SMITH,  of  Illinois.  They  can  go  into  the  market  and  pur- 
chase them  if  they  are  anxious  to  keep  their  circulation.  But  I do 
not  think  they  will  be  very  anxious  to  keep  their  circulation. 

Mr.  BUCKNER.  I will  give  the  figures.  There  are  seventy-five 
millions  of  bonds  which  are  held  to  secure  the  sixty -nine  millions  of 
circulation  of  these  banks,  only  fifty  millions  of  which  are  34  per. 
cent,  bonds.  Supposing  these  banks  holding  these  fifty  millions 
have  no  other  security  than  the  3^  percents,  what  becomes  of  their 
circulation  unless  they  are  willing  to  buy  4 and  44  percents  ? 

Mr.  SMITH,  of  Illinois.  I think  I should  answer  that  question. 
When  we  come  to  Congress  next  winter,  when  the  gentleman  from 
Missouri  will  be  here  and  when  I shall  be  here,  we  can  pass  a law 
allowing  the  unlimited  coinage  of  silver  in  order  to  replace  the  circu- 
lation which  may  have  been  retired ; and  I shall  favor  that  when 
the  time  comes.  The  probability  is  however  that  these  banks  which 
will  lose  this  circulation,  or  rather  whose  bonds  will  be  called  by  the 
Secretary  of  the  Treasury,  will  go  into  the  markets  and  purchase  4 
or  4^  percents  which  have  many  years  to  run,  provided  they  desire 
to  keep  their  circulation.  There  is  not,  let  me  say,  such  a great  dis- 
position on  the  part  of  the  national  banks  to  secure  as  much  circu- 
lation as  possible.  What  are  the  facts  in  that  connection  ? 

It  is  not  very  profitable  to  the  national  banks  to  have  this  circu- 
lation. If  that  is  conceded,  then  what  becomes  of  this  great  outcry, 
over  which  my  friend  from  Missouri  [Mr.  Bland]  grows  hoarse  in 
speaking,  about  the  great  iniquity  inflicted  upon  the  people  of  the 
United  States,  who  he  says  are  compelled  to  pay  interest  on  these 
bonds  in  order  that  these  monopolists  may  have  the  privilege  of  issu- 
ing the  circulating  medium  for  the  people  ? 

Now,  the  facts  are  these,  gentlemen,  and  you  are  as  well  aware  of 
it  as  I am,  that  the  national  banks  newly  organized,  more  particu- 
larly in  the  West,  take  out  as  little  circulation  as  possible. 

Only  a few  days  ago,  when  I was  on  my  return  here  from  a visit 
home,  I was  seated  by  the  side  of  the  cashier  of  a national  bank,  and  I 
asked  him  in  regard  to  this  bill.  He  said  that  they  had  organized  a 
|50,000  bank  some  time  ago,  and  had  taken  out  just  $27,000  of  circu- 
lation, because  they  did  not  want  more ; it  did  not  pay. 

Then  it  will  be  asked  why  do  men  go  into  the  national  banking 
business  ? It  is  because  the  people  believe  it  has  the  protection  and 
supervision  of  the  United  States  Government.  It  commends  itself 
to  the  people  because  the  Government  appoints  men  to  investigate 
the  affairs  of  these  banks,  because  they  must  make  under  oath  their 
quarterly  reports.  In  this  way  the  people  in  the  various  localities 


7 


can  see  how  their  moneys  are  managed,  under  the  national  banting 
system. 

Right  here,  in  that  connection,  I would  say  that  I think  the  inves- 
tigation of  the  national  banks  should  be  more  thorough  and  more 
strict.  I hope  gentlemen  in  this  House  will  make  that  point  in  their 
speeches,  and  call  the  attention  of  the  Comptroller  of  the' Currency 
to  the  fact  that  a better  supervision  of  the  national  banks  is  possi- 
ble, as  has  been  shown  by  the  failure  of  some  prominent  institutions 
by  which  the  people  have  lost  large  sums  of  money. 

Yet  this  is  a remarkable  fact  that  although  tkereTire  now  twenty- 
two  hundred  national  banks  and  over,  and  although  there  have  been 
twenty-five  hundred  national  banks  organized,  in  all  these  years 
only  eighty-six  of  them  have  gone  into  forced  liquidation.  And  the 
depositors,  not  the  stockholders,  but  the  depositors,  the  people,  have 
received  from  these  eighty-six  national  banks  over  76  per  cent,  of  all 
the  money  they  had  deposited  in  them. 

There  never  has  been  such  a banking  system  in  the  world  for 
safety,  for  security  to  the  penple,  as  the  national  banking  system  of 
this  country.  It  should,  tlierefore,  be  maintained,  and  it  will  be 
maintained,  notwithstanding  the  prediction  of  my  friend  from  Mis- 
souri, [Mr.  Eland,]  who  sounded  the  death-knell  of  every  member 
of  Congress  who  should  go  before  the  people  with  a vote  in  favor  of 
continuing  these  national  banks. 

I want  to  state  to  the  gentleman  that  I made  that  very  issue  upon 
the  stump  when  I ran  for  Congress,  and  I defeated  a Greenback  Dem- 
ocrat who  was  opposed  to  national  banks.  I made  the  issue  fairly 
and  squarely,  holding  the  Republican  party  responsible  for  their  ex- 
istence and  advocating  their  continuation  as  being  for  the  best  in- 
terest of  the  people.  Upon  that  issue  I defeated  my  opponent.  If 
there  6ver  was  a financial  institution  that  commended  itself  , to  the 
people,  it  is  the  national  banking  system  of  the  United  States.  No 
Republican  need  hesitate  to  defend  it.  It  commends  itself  to  the 
confidence  of  the  people,  and  if  it  is  fairly  represented  the  people 
will  sustain  every  man  who  advocates  its  continuance. 

One  objection  that  is  made  to  the  national  banks,  and  it  is  the  one 
that  is  most  often  made,  is  that  they  cost  the  Government  or  the 
people  too  much.  That  objection  was  repeated  by  my  friend  from 
Missouri^,  [Mr.  Bland;]  but  he  does  not  show  by  the  figures  how 
much  it  costs  the  people  of  the  United  States.  I challenge  him  to 
show  the  figures  of  the  cost  to  the  people  of  the  United  States  of 
maintaining  the  national  banks. 

Mr.  BLAND.  As  the  gentleman  challenges  me,  I will  tell  him  that 
it  costs  $12,000,000  annually. 

Mr.  SMITH,  of  Illinois.  How  do  you  figure  that  out  ? 

Mr.  BLAND.  I figure  it  out  this  way:  If  the  national  banks  were 
required  to  redeem  their  circulation,  the  Government  could  then  re- 
deem a sufficient  amount  of  bonds  to  save  $12,000,000  annually.  The 
Government  giving  these  banks  that  amount  of  circulation  to  use 
for  their  benefit,  denies  that  to  the  people.  And  it  costs  $12,000,000 
to  continue  the  bonds  that  could  be  redeemed,  if  the  national-bank 
circulation  were  required  to  be  redeemed. 

Mr.  SMITH,  of  Illinois.  That  is  with  an  “ if.” 

Mr.  BLAND.  Not  at  all. 

Mr.  SMITH,  of  Illinois.  The  gentleman  starts  out  on  his  proposi- 
tion with  an  “if.” 

Mr.  BLAND.  Certainly. 


Mr.  SMITH,  of  Illinois.  Wliat  is  tlie  difference  between  the  in- 
terest paid  by  the  United  States  and  the  taxes  paid  by  the  banks  to 
the  Government  ? That  is,  the  cost  that  the  Go  vernment  must  bear. 

Mr.  BLAND.  The  interest  that  these  banks  pay  on  their  circula- 
tion hardly  pays  for  the  expense  of  keeping  it  up. 

Mr.  SMITH,  of  Illinois.  They  pay  1 per  cent,  on  their  circula- 
tion. 

Mr.  BLAND.  And  that  just  about  pays  the  expense  of  the  circula- 
tion. 

Mr.  SMITH,  of  Illinois.  Oh,  no. 

Mr.  HUTCHINS.  Will  the  gentleman  allow  me  a moment  ? 

Mr.  SMITH,  of  Illinois.  With  pleasure. 

Mr.  HUTCHINS.  Is  the  gentleman  aware  of  the  amount  of  taxes 
paid  by  the  national  banks  ? Take  those  in  the  city  of  Newr  York, 
for  instauce ; they  have  paid  as  high  as  3 per  cent,  a year,  and  this 
year  they  are  taxed  nearly  2.60  per  cent.,  so  that  they  pay  into  the 
city  treasury  of  New  York  something  like  $1,700,000  a year  in  taxes. 

Mr.  SMITH,  of  Illinois.  I am  aware  of  that  fact. 

Mr.  BLAND.  The  State  banks  would  pay  taxes  on  their  circu- 
lation. 

Mr.  HUTCHINS.  Is  it  understood  on  the  part  of  those  who  would 
issue  Treasury  notes  or  greenbacks  that  they  are  to  be  taxed  ? 

Mr.  SMITH,  of  Illinois.  I thank  the  gentleman  for  the  figures  he 
has  given  me.  I will  supplement  them  by  saying  that  as  the  na- 
tional banks  must  publish  the  amount  of  their  capital  stock  and 
their  deposits  they  are  thus  subjected  to  local  taxation  as  are  no 
other  institutions  in  the  United  States. 

Mr.  HUTCHINS.  Is  it  not  a fact  that  the  national  banks,  so  far  as 
the  gentleman  knows,  are  the  only  institutions  in  the  country  that 
pay  tax  on  the  full  value  of  their  capital  ? 

Mr.  SMITH,  of  Illinois.  In  my  experience  as  a banker  I have  seen 
a national  bank  with  a capital  of  $100,000  crowded  to  the  wall  by 
municipal  taxation,  because  the  assessor  in  that  locality  chose  to 
assess  the  capital  stock  at  its  full  value,  while  the  neighbors  of  that 
bank  paid  taxation  under  the  laws  of  the  State  upon  a valuation 
of  only  one-third. 

Mr.  TOWNSHEND,  of  Illinois.  I would  like  to  ask  my  colleague 
whether  he  knows  of  any  national  bank  that  has  ever  been  taxed 
upon  its  reserve  fund  ? 

Mr.  DINGLEY.  I do. 

Mr.  TOWNSHEND,  of  Illinois.  I know  of  some  national  banks 
that  have  a larger  reserve  fund  than  their  capital,  and  yet  they  es- 
cape taxation  upon  the  reserve  fund. 

Mr  1 In  New  Hampshire  every  dollar  of  the  surplus  is  taxed. 

Mr.  TOWNSHEND,  of  Illinois.  I do  not  know  a single  national 
bank  in  Illinois  that  has  ever  paid  a cent  of  taxation  upon  its  re- 
serve, and  I know  of  no  bank  in  New  York  City,  although  I have 
some  knowledge  of  several  national  banks  there,  that  has  ever  paid 
any  taxation  whatever  upon  its  surplus. 

Mr.  FLOWER.  The  Gallatin  National  Bank  is  taxed  by  the  State 
and  city  upon  its  stock  at  a valuation  of  145,  making  an  aggregate 
taxation  of  $36,975,  while  the  bonds  of  the  bank  deposited  with  the 
national  Government  and  paying  less  than  3 per  cent,  interest  yield 
the  bank  only  $30,000. 

Mr.  TOWNSHEND,  of  Illinois.  Does  that  bank  pay  a tax  on  its 
surplus  ? 


9 


Mr.  HUTCHINS.  Certainly. 

Mr.  TOWNSHEND,  of  Illinois.  It  is  tlie  first  case  of  the  kind  I 
have  heard  of. 

Mr.  SMITH,  of  Illinois.  The  surplus  fund  of  a hank  in  my  State 
is  taxed  equally  with  its  capital.  Under  the  laws 'of  Illinois  the  as- 
sessor, if  he  understands  his  business,  can  and  will  always  require  a 
bank  to  pay  its  full  share  of  taxation.  By  our  law  as  now  amended 
the  capital  of  national  banks  is  only  to  be  assessed  as  other  property 
is ; and  that  is  just.  _ 

Mr.  BUCKNER.  Does  not  the  gentleman  from  Illinois  know  that 
during  the  last  year,  notwithstanding  all  this  local  and  national 
taxation  under  which  these  banks  are  supposed  to  be  groaning,  the 
national  banks  throughout  the  country  have  paid  upon  the  average 
9 per  cent,  dividend  to  their  stockholders  ? 

Mr.  SMITH,  of  Illinois.  That  is  right,  Mr.  Speaker.  That  speaks 
well  for  the  prosperity  of  our  country.  I have  no  complaint  to  make 
abopt  national  banks  realizing  for  their  stockholders  9 per  cent,  when 
other  branches  of  industry  yield  quite  as  much.  Why  should  we  ob- 
ject because  the  national  banks  make  a fair  profit? 

Mr.  DINGLEY.  I would  like  to  correct  the  gentleman  from  Mis- 
souri [Mr.  Buckner]  at  this  point.  When  he  speaks  about  the  na- 
tional banks  making  dividends  of  9 per  cent,  on  the  average,  does  he 
not  understand  that  the  local  taxation  is  to  be  deducted,  so  that  the 
average  net  profit  is  2 per  cent,  less  ? 

Mr.  BUCKNER.  I can  only  state  that  the  report  of  the  Comp- 
troller of  the  Currency  shows  that  the  dividends  of  these  banks  last 
year  averaged  9 per  cent,  after  the  payment  of  all  taxes. 

Mr.  DINGLEY.  Not  the  local  taxation.  The  shareholder  pays  the 
local  taxation  after  the  dividend  is  paid. 

Mr.  HUTCHINS.  And  in  some  cases  the  local  taxation  is  5 per 
cent. 

Mr.  DINGLEY.  It  is  5 per  cent,  in  some  cases.  In  my  State  it 
averages  2 per  cent. 

Mr.  RAY.  In  the  State  of  New  Hampshire  the  lowest  rate  of  tax- 
ation of  bank  stock  is  the  par  value  of  the  stock.  If  the  market 
value  is  higher,  then  it  goes  into  the  assessment  roll  at  its  market 
value,  aud  is  taxed  accordingly.  The  surplus  also  is  taxed  by  law, 
the  same  as  other  money  at  interest. 

Mr.  TOWNSHEND,  of  Illinois.  I wish  to  ask  my  colleague  [Mr. 
Smith]  whether  in  Illinois  the  individual  shareholder  is  assessed 
upon  the  amount  of  the  stock  he  holds  in  a national  bank  ? Is  not 
the  tax  collected  through  the  bank  ? Is  it  not  paid  by  the  cashier  ? 

Mr.  SMITH,  of  Illinois.  Yes,  sir. 

Mr.  TOWNSHEND,  of  Illinois.  Then,  my  friend  from  New  York 
is  mistaken 

Mr.  FLOWER.  If  the  gentleman  from  Illinois  will  read  the  decis- 
ion made  last  year  by  Judge  Brady  he  will  find  that  the  stock  of 
national  banks  is  subject  to  municipal  and  State  taxation  to  the  full 
amount  of  its  market  value. 

Mr.  TOWNSHEND,  of  Illinois.  But  I understand  that  the  indi- 
vidual stockholder  does  not  pay  the  tax  upon  his  stock  directly ; 
that  the  tax  is  collected  through  the  bank. 

Mr.  DINGLEY.  Not  at  all. 

Mr.  TOWNSHEND,  of  Illinois.  My  colleague,  who  is  a banker, 
can  answer  that  question. 

Mr.  DINGLEY.  When  the  Comptroller  of  the  Currency  states 


10 


that  the  profits  of  the  national  hanks  last  year  averaged  9 per  cent., 
he  deducts,  in  reaching  that  result,  the  national  taxes  only,  not  lo- 
cal taxation. 

Mr.  BUCKNER.  He  does  not  say  so. 

Mr.  DINGLEY.  That  is  the  fact. 

Mr.  SMITH,  of  Illinois.  Mr.  Speaker,  I have  been  very  patient 
with  my  friends  during  these  interruptions,  because  by  colloquy  the 
points  of  a question  like  this  are  often  better  brought  out  than  by 
lengthy  speeches.  I solicit  inquiry ; and  whenever  I make  a state- 
ment, if  any  member  believes  it  incorrect  I wish  him  to  rise  and  so 
state.  I want  to  be  fair  about  this  matter.  I believe  it  is  the  inter- 
est of  all  the  people  of  the  United  States  that  the  national  banking 
system  should  be  continued.  Therefore,  I favored  this  bill  in  com- 
mittee and  support  it  now. 

I now  turn  to  a topic  which  has  been  much  talked  about  on  the 
stump  and  in  the  Halls  of  Congress.  What  profit  do  the  national 
banks  realize  upon  this  privilege  of  issuing  circulation  ? The  gentle- 
man from  Massachusetts  has  fully  set  forth  the  facts,  but  it  wil-1  do 
no  harm  to  repeat  them.  Here  is  a table.  In  Illinois,  where  the  rate 
of  interest  is  8 per  cent.,  the  profit  to  national  banks,  whose  currency 
is  based  on  per  cent,  bonds,  is  1.28  per  cent. 

The  people  of  the  United  States,  for  the  privilege  of  having  the 
national  banking  system  for  the  State  of  Illinois,  pay  1.28  percent., 
which  is  the  entire  cost  to  the  people  of  the  United  States  of  the  na- 
tional-bank circulation,  leaving  out  of  the  calculation  the  advan- 
tages which  accrue  to  the  people  by  municipal  taxation. 

There  is  one  other  point  I wish  to  call  to  the  attention  of  this 
House,  and  that  is  the  advantage  to  the  Government  of  the  United 
States  of  the  national  banks  as  fiscal  agents.  Have  you  thought  of 
it,  that  the  millions  and  millions  of  dollars  of  revenue  paid  by  the 
people  of  the  United  States  are  handled  by  this  national  banking- 
system,  through  its  depositaries,  without  a cent  of  cost  to  the  Govern- 
ment of  the  United  States  ? What  would  be  the  cost  if  you  had  the 
State-bauk  system  ? Do  you  suppose  the  State  banks  would  ac- 
commodate themselves  to  the  interest  of  the  national  Government, 
handle  all  this  money  and  transfer  all  these  exchanges  without  cost  f 
It  is  because  the  national  banking  system  is.  under  the  supervision  of 
the  United  States  Government  that  these  facilities  are  offered  to  the 
officers  of  the  Government  without  (Tost  to  the  people.  And  that 
amounts  to  a far  greater  sum  if  you  would  figure  the  exchanges 
that  would  have  to  be  paid  if  they  did  it  through  private  banks. 
As  a question  between  the  private  banks  and  the  national  banks, 
do  you  not  suppose  those  private  banks  would  charge  the  Govern- 
ment for  doing  this  work  ? 

And,  more  than  that,  these  national  banks  offer  as  security  the  de- 
posit of  national  bonds ; that  is  to  secure  the  deposits  which  are  made 
with  them  as  fiscal  agents  of  the  Government.  So  that  the  Govern- 
ment of  the  United  States  is  perfectly  safe  every  night  when  its  rev- 
enues are  paid  into  the  vaults  of  these  national  banks  distributed 
all  over  the  territory  of  the  United  States.  Every  dollar  of  that  is 
secured  beforehand  by  the  bonds  deposited  in  the  Treasury  at  Wash- 
ington. You  must  not  keep  that  out  of  view,  because  I think  it  is 
an  important  fact  when  we  consider  the  cost  of  the  national  banks 
to  the  people  of  the  United  States. 

There  is  one  remark  made  by  the  gentleman  from  Missouri  [Mr. 
Bland]  which  might  mislead.  He  said,  What  is  the  national-bank 


11 


note  other  than  a state  paper  ? I understood  what  he  meant,  but 
the  impression  might^be  made  by  that  remark  that  the  national-bank 
note  is  no  better  than  the  State  notes  we  had  before  the  war.  It  is 
based  on  the  credit  of  the  United  States  Government,  upon  the  na- 
tional bonds,  and  upon  the  national  credit. 

Mr.  BLAND  rose. 

Mr.  SMITH,  of  Illinois.  I understood  the  gentleman  and  will  do 
him  justice. 

Mr.  BLAND.  I do  not  wish  the  gentleman  to  make  a false  impres- 
sion. I have  no  idea  that  a State-bank  note  is  better  than  a Treasury 
note  issued  by  the  Government. 

Mr.  SMITH,  of  Illinois.  Mr.  Speaker,  the  experience  of  the  peo- 
ple of  the  United  States  with  that  “ wild-cat  money”  is  not  yet  for- 
gotten. The  fathers  teach  it  to  their  sons  that  they  also  may  profit 
by  the  lesson  that  it  inculcates.  They  speak  of  the  “ bob-tail,” 
“ rag-tag,”  and  “red-dog”  currency,  or  whatever  other  name  that 
currency  had  in  other  days,  and  they  point  with  pride  to  the  national- 
bank  currency  and  the  “greenback”  currency  as  such  a valuable 
substitute  for  that  other  which  was  based  upon  the  credit  of  the 
States. 

Now,  I believe,  Mr.  Speaker,  that  the  opposition  to  the  national 
banking  system  lies  in  the  fact  that  there  are  still  many  gentlemen  on 
this  floor  who  believe  that  the  States  should  furnish  the  basis  of  cir- 
culation. I think  the  experience  of  the  people  will  never  again  allow 
the  States  to  furnish  the  basis  of  circulation . 

Mr.  TOWNSHEND,  of  Illinois.  Who  are  they  ? 

Mr.  SMITH,  of  Illinois.  I say  that  I have  the  impression  many  of 
them  do. 

Mr.  TOWNSHEND,  of  Illinois.  Does  my  friend  know  of  any  ? 

Mr.  SMITH,  of  Illinois.  I should  think  perhaps  the  gentleman 
from  Mississippi,  where  national  banks  are  scarce. 

Mr.  TOWNSHEND,  of  Illinois.  I am  not  in  favor  of  State  or 
national  banks. 

Mr.  DINGLEY.  Were  not  five'bills  repealing  the  10  per  cent,  tax 
on  State-bank  circulation  introduced  during  the  last  Congress  ? 

Mr.  TOWNSHEND,  of  Illinois.  I was  not  aware  of  it. 

Mr.  DINGLEY.  That  is  all  that  stands  in  the  way  of  the  resusci- 
tation of  the  State  banks. 

Mr.  TOWNSHEND,  of  Illinois.  The  opposition  on  this  side  is  to 
all  banks  of  issue.  We  believe  we  can  issue  Treasury  notes  as  good 
in  every  respect  as  national-bank  notes. 

Mr.  DINGLEY.  But  there  are  some  gentlemen  yet  in  favor  of  the 
State  banks. 

Mr.  TOWNSHEND,  of  Illinois.  They  are  very  few  in  number. 

Mr.  BRUMM.  The  only  one  I know  of  is  one  gentleman  on  the 
Committee  on  Banking  and  Currency,  who,  I believe,  is  in  favor  of 
this  bill,  hoping  through  this  we  may  ultimately  get  down  to  the 
State  banks.  I refer  to  the  gentleman  from  New  York. 

Mr.  FLOWER.  Does  the  gentleman  allude  to  me  ? 

Mr.  BRUMM.  Yes,  sir  ; the  only  gentleman  I know  of  in  favor  of 
State  banks. 

Mr.  FLOWER.  The  gentleman  misquotes  me. 

Mr.  BRUMM.  Then  I beg  the  gentleman’s  pardon.  I certainly 
have  misunderstood  him. 

Mr.  FLOWER.  It  would  not  perhaps  be  safe  to  say  that  no  banker 
in  this  country  would  like  to  go  back  to  the  State-bank  system,  be- 


12 


cause  lie  made  6 per  cent,  on  his  own  mortgages  and  6 or  7 per  cent, 
on  his  currency  under  the  old  safety-fund  system  of  the  State  of  New 
York  ; and  certainly  no  hanker  would  object  to  that,  because  he 
could  make  more  by  that  system  than  by  this. 

Mr.  SMITH,  of  Illinois.  I have  promised,  Mr.  Speaker,  to  yield  a 
part  of  my  time,  and  therefore  I will  hurry  through  with  my  re- 
marks. 

The  SPEAKER  pro  tempore , (Mr.  Thompson,  of  Iowa,  in  the  chair.)  - 
The  gentleman  has  five  minutes  remaining. 

Mr.  SMITH,  of  Illinois.  I believe  that  the  time  will  soon  come 
when  the  national  banks  will  be  willing  to  voluntarily  purrender  their 
circulation.  Now,  as  I have  before  stated,  they  have  reduced  the 
amounts  to  the  minimum  allowed  by  law.  I think  that  if  Congress 
by  judicious  legislation  will  hedge  the  system  about,  and*let  them 
understand  that  it  shall  be  maintained  for  all  future  time,  this  cir- 
culation may  be  surrendered  as  rapidly  as  the  bonds  may  be  paid  off, 
which  I hope  may  be  very  soon. 

We  learn  by  the  experience  of  the  people  of  England  that  we  should 
base  our  circulation  upon  gold  and  silver  in  the  hands  or  the  vaults  of 
the  Government.  I suppose  all  gentlemen  here  know  that  the  Bank 
of  England  issues  about  fifteen  million  pounds  of  circulation  upon  a 
credit,  and  that  all  the  rest  of  the  circulation  is  based  dollar  for  dol- 
lar on  the  amount  of  specie  in  the  vaults  of  the  bank.  If  our  pros- 
perity continues,  as  I said  before,  I believe  the  time  is  not  very 
far  distant  when  we  can  also  bank  as  the  Bank  of  England  does  to- 
day, which  is  the  proper  way  ; and  it  will  prevent  panics  and  pre- 
vent people  from  rushing  to  the  banks  to  realize  upon  their  notes  in 
gold  and  silver.  Let  us  shape  our  legislation  to  that  end,  that  we 
may  make  it  safe  for  the  people  to  intrust  their  money  and  funds  now 
in  hand  to  the  care  and  keeping  of  the  banks. 


C 


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